Disney is making a $20 million bid for bankrupt Chatbot platform Character.AI

Chatbot platform Character.AI filed for bankruptcy late on Monday, saying it has agreed to sell some assets for $20 million to Walt Disney, according to Reuters. The high-profile artificial intelligence startup filed its court papers in Wilmington, Delaware bankruptcy court to reach a global resolution of all legal claims against the company. Those legal claims include investigations launched by US states and international regulators, as well as private lawsuits. Character.AI has been burning through over $8 million a month and could shut down in bankruptcy if no other buyer emerges to carry on its operations. Walt Disney, which hired Character.AI's ex-CEO Karandeep Anand as its chief technology officer earlier this month, will act as a stalking-horse bidder for a nonexclusive perpetual license to the company's intellectual property. Character Technologies, its US-based owner, listed estimated assets and liabilities of between $50 million and $100 million in court filings. The platform will continue to operate during the bankruptcy, but it may be shut down if it cannot find a permanent buyer. Character.AI has not been profitable despite having roughly 12 million active users. Due to the high costs of computing power and employing artificial intelligence talent, the company operates at a loss of approximately $8 million to $9 million per month. Two former Google employees founded Character.AI in 2021 before the company hit severe financial trouble. Disney sent Character.AI a cease-and-desist letter in September 2025 demanding it stop using copyrighted characters without permission, before later moving in to acquire its technology license.